Capital Splash or Operational Streamlining? The Dilemma of an Uncertain Market
The Best Strategy to Decrease Multifamily Operating Expenses
In connecting with many of my colleagues in multifamily, it’s clear that 2024 has been a year of market uncertainty. Rising interest rates have driven up borrowing costs for multifamily operators. High inflation has bumped up multifamily operating expenses, including maintenance, utilities, property taxes and insurance. Even rental demand, which has generally remained positive, fluctuates significantly from market to market.
When faced with all this, it’s not surprising to hear a drumbeat around belt-tightening from so many multifamily professionals. Implementing cost-saving measures where possible and even adjusting rental strategies are both sound ways to remain competitive in the market. But along with these challenges, I also believe the multifamily housing market presents opportunities.
While factors like rising interest rates and inflationary pressures can squeeze profit margins and increase multifamily operating expenses, there’s still a persistent demand for rental housing that provides a solid foundation for investment in this sector. I hear lots of colleagues talk about the shift in lifestyle preferences among renters, including a growing preference for renting over homeownership among certain demographics. To me, that says demand will continue for multifamily properties in the long term.
All of this begs the question: Is capital spending a sound strategy in today’s multifamily environment? My answer is maybe. Depending on your needs and density, capital spending can help multifamily operators address challenges and position themselves for long-term success. By allocating funds towards initiatives that improve property value, operational efficiency, resident satisfaction and market competitiveness, operators can mitigate risks associated with uncertain market conditions and capitalize on growth opportunities. I’ve outlined some of the pros and cons of several examples below.
Example 1: Renovation and Modernization
Investing in property renovations and modernization efforts can enhance the attractiveness of multifamily properties to residents, potentially allowing operators to command higher rental rates and reduce vacancy rates. For example, upgrading common areas, installing energy-efficient appliances, or adding amenities such as a fitness center or community garden can differentiate a property in the market and improve its overall appeal.
Pros:
- Increased resident satisfaction and retention
- Potential for higher rental income
- Enhanced property value and marketability
- Competitive advantage in attracting new residents
Cons:
- Upfront costs may be substantial with cash flow not being optimal due to rates
- Disruption to residents during renovation process
- ROI may vary depending on market conditions and property location
Example 2: Technology Integration
Investing in technology solutions such as property management software, smart home devices or security systems can streamline operations, boost productivity and leave your residents feeling well cared for. So many of you are now reaping the automation benefits of a robust property management platform like rent collection, maintenance requests and lease renewals. No doubt, you’re seeing how automations free up staff time and reduce administrative overhead.
Pros:
- Increased operational efficiency
- Decreased multifamily operating expenses
- Improved resident satisfaction and retention
- Enhanced data management and analytics capabilities
- Better security and risk management
Cons:
- Initial investment in technology infrastructure
- Training staff on new systems and processes
- Potential for technical glitches or system downtime
- Corporate overhead to focus on this initiative
Here at RemoteLock, we’re hearing from multifamily customers that streamlining operational processes may seem like a small step, but it’s paying off in big ways. For example, implementing electronic access control systems yields valuable benefits for both residents and property staff.
Electronic Access for Daily Operations
With RemoteLock’s PMS integrations, you can take those efficiencies one step further and streamline one of the most access-heavy processes: unit turnovers. Because of these helpful connections between RemoteLock and PMS like Yardi, AppFolio and RealPage, access codes are automatically created and revoked according to a resident’s status in the PMS—without you lifting a finger. You set a new resident to move in via one of these integrated PMSs, just like you always do. Behind the curtain, RemoteLock automatically issues access codes for the appropriate unit and common doors. Set a resident to move out, and RemoteLock revokes access.
- Saves money on rekeying and locksmith costs
- Reduces staff time spent on-site for access issues
- Enhances safety by eliminating the need for physical keys, reducing the risk of unauthorized access
There are no extra steps or manual entry required on your part. The same can also happen for everyone involved in completing the apartment turn—access codes for maintenance, painters, cleaners, etc. are automatically created or revoked.
Another benefit of an electronic access solution like RemoteLock: It enables home sharing, which is catching on with the younger generation of renters who want to travel and work remotely, while still maintaining a home base. Multifamily operators can take advantage of RemoteLock’s integrations with popular booking platforms for short-term renting and address pain points like vacancy and seasonality.
Pros:
- Saves time by automating access provisioning for new residents
- Gets units ready faster, reducing vacancy periods
- Minimizes the risk of manual errors and unauthorized access during turnover processes
- Combats increasing vacancy rates and creates an additional revenue stream via home sharing
So add to the drumbeat! Belt-tightening is always a good idea. But spending capital in strategic areas may also reveal valuable opportunities worth capitalizing on. Finding a balance of both these strategies can be a winning formula for multifamily operators to remain competitive and even thrive in today’s uncertain market.
Want to learn more about RemoteLock’s multifamily access software?
Devin Wirt
VP of Multifamily Sales
With decades of experience in the real estate industry, Devin leads the RemoteLock sales team in the multifamily sector. He believes strongly that the right people and process are what make a product successful. Devin is also enthusiastic about how proptech can create sought-after, prosperous multifamily communities where people love to live and work.
